High Tech And Robots Can Create More Low Skilled Jobs, Not Just Destroy Them

As we all wait anxiously for the robots to come and steal all our jobs an interesting finding in a study on the effect of ever higher technology on the demand for low skilled labour. Contrary to what everyone seems to be assuming it is possible for that higher tech to actually increase the demand for that low skilled labour. For the higher tech enables that lower skilled labour to perform tasks that could only previously be done by highly skilled labour. And as the costs associated with whatever the task is fall then we quite naturally demand more of that task to be done. Thus, in certain cases at least, higher tech increases the number of jobs, not reduces them.

Yet it is a mistake for managers to assume that they need to hire highly educated workers to handle new technology; employees gain much critical knowledge about new technologies through experience on the job and such learning often does not require a high degree of education. Managers need to understand the role of technological maturity, the value of experience, and how employees’ technical skills develop under different business models. Indeed, economic research shows that new technology increases the need for more educated workers at first, but, as technology matures, less educated workers are hired in general.

The specific example they use is the Licenced Practitioner Nurse, one of the various (and not a very high one) grades into which the nursing profession is divided. They note that a few years back the general assumption was that demand for this skill set would reduce: medicine itself was becoming ever higher tech therefore the people needed to perform medicine would need to have ever greater skill levels. What has actually happened is the opposite. Demand for LPN skills has risen, not fallen.

For the higher tech made, via greater automation, it possible for people with those lower level skill sets to perform tasks that had only previously been possible by those with higher skill sets. Don't think that this is confined to medicine either: I'd say that approximately none of us are able to drive a coach and four but most 16 year olds these days master driving a car pretty quickly. And the car is very much a high tech replacement for the coach: but it's the very higher tech i9tself that makes it so much easier to learn how to operate it.

This isn't unusual in economics, that we have two effects from the same change, the two working in opposite directions. It's the interplay of the income effect (the amount of post tax income I need to live, meaning tax rises might make me work more, not less) and the substitution effect (higher taxes might make me think, forget it, and go fishing instead) that gives us the Laffer Curve. And yes, the Laffer Curve is real, it's the shape and rate at which it peaks which is under discussion. Similarly, the Tabarrok Curve describes patents and copyrights. Without them at all we are pretty sure there would be less innovation as it would be very difficult to profit from invention if anyone could immediately copy it. But protection that is too strong deprives us of some unknown amount of derivative invention and innovation. Two effects, working in opposite directions, giving us a curve with a sweet spot that's where we'd like to be.

In these two examples my general assumption is that we're below the Laffer Curve peak currently although not by much and over the peak of the Tabarrok Curve by quite a lot.

Looking more closely at the effect of high tech on low skill jobs it seems that we have, again, two effects. Sure, sometimes tech will simply wipe out an entire class of tasks: there are no typing pools around any more these days for example. On the other hand some tech will mean that a task which could only previously be performed by highly skilled labour can now be done by more lowly skilled such. In which case we might expect the associated price fall to increase demand for the task itself and thus push up, possibly, not only the number of low skilled jobs but the number of all jobs.